LONDON — You have only a few weeks to use your ISA allowance before the April 5 deadline, so don’t fluff this great tax-saving opportunity. You can invest up to 11,280 pounds in the current tax year, and put the lot of it into stocks and shares. To find out more, click here.
But which stocks should you buy? How about AstraZeneca plc (ADR) (NYSE:AZN)?
The power of Zen
I’ve been a bit rude about AstraZeneca in the past, complaining that its share price has gone nowhere, slowly.
But this FTSE 100 pharmaceutical giant has some impressive admirers, notably income supremo Neil Woodford, so maybe I’m missing something. Should I buy AstraZeneca for my ISA?
This stock crushes cash
There is one big fat juicy reason to buy AstraZeneca. It currently gives you a stonking dividend yield of 6%, one of the best in the FTSE 100.
That 6% yield is twelve times the Bank of England base rate, and three times as much as any “best buy” cash ISA can deliver, which struggle to pay more than 2%.
Yes, shares are more volatile, but they should be more rewarding over the longer term. Over the past five turbulent years, AstraZeneca’s share price has grown 66%, with all those juicy dividends on top.
Show me the cash account that has done that, and I would pour my life savings into it. It doesn’t exist.
Woodford may have put his faith in this pharma, but the market has been divided.
In January, new chief executive Pascal Soriot warned that 2013 revenues would fall by mid-to-high single digits as product patents expired and a blockage of new products in the pipeline.
Total sales fell 16% in the last three months of 2012, to $7.28 billion, and AstraZeneca plc (ADR) (NYSE:AZN)’s share price fell 6% in response.
While rival GlaxoSmithKline plc (ADR) has a flourishing consumer-health care operation, with familiar brands such as Sensodyne, Panadol, Aquafresh, Lucozade, and Nicorette, AstraZeneca is a pure play on pharmaceuticals and treatment development.
This lack of diversification is dangerous, especially in a time of austerity, when governments are desperately squeezing health budgets along with everything else.
To Russia with hope
Similar to many FTSE 100 companies, AstraZeneca is looking for a healthy injection of emerging-market growth, with revenue from countries such as China, Saudi Arabia and Russia growing 6% in the fourth quarter.